Source link : https://london-news.net/russias-finance-ministry-proposes-2-vat-increase-amid-growing-budget-deficit/
On Wednesday, the Russian Finance Ministry put forward a proposal to increase the country’s value-added tax (VAT) from 20% to 22% starting next year. This move is part of a new three-year budget strategy intended to address escalating defense and security expenditures.
According to the business publication Kommersant, which initially released but later retracted a Finance Ministry forecast, the tax hike could yield approximately 1.3 trillion rubles ($15.5 billion) in annual revenue. The same forecast indicated that Russia’s GDP growth is projected to slow to 1% this year, significantly lower than the previous estimate of 2.5%. For 2026, economic growth is now expected to be only 0.5%, much less than earlier forecasts of 3%.
The Finance Ministry is aiming to reassure consumers, who might feel the immediate effects of the VAT increase, by stating that the influence on prices will be “moderate and limited.” In a statement released on Wednesday, they affirmed that a reduced VAT rate of 10% will continue to apply to essential items such as bread, dairy products, meat, medicine, and items for children.
However, the Central Bank of Russia has noted that the last VAT hike of 2% in 2019 accounted for an increase of 0.6 percentage points in that year’s inflation rate. Raising consumption taxes can lead to inflation as it directly elevates the prices of goods and services.
This proposed tax increase comes in the wake of the federal budget deficit, which reached 4.88…
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Author : rimmaruslan98@gmail.com
Publish date : 2025-09-24 13:21:00
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